Optimal Taxation, Environment Quality, Socially Responsible Firms and Investors

Renström, Thomas I., Luca Spataro and Laura Marsiliani

International Review of Environmental and Resource Economics, 2019, vol. 13, issue 3-4, 339-373

Abstract: We characterize the optimal pollution-, capital- and labour-tax structure in a continuous-time model in the presence of pollution (resulting from production), both in the first- and second-best, allowing investors to be driven by social responsibility objectives. The social responsibility objective takes the form of warm-glow, as in Andreoni (1990) and Dam (2011), inducing firms to reduce pollution through increased abatement activity. Among the results, the second-best pollution tax displays an additivity property and the Chamley–Judd zero capital-income tax can be violated under warm-glow preferences. We also show that first- and second-best pollution taxes are positive, under warm-glow preferences, and, under mild assumptions, the latter yield lower first-best pollution taxes and lower pollution intensity.

Keywords: Socially responsible investment; corporate social responsibility; environmental quality; optimal taxation; pollution (search for similar items in EconPapers)
JEL-codes: D21 D53 G11 H21 H23 M14 Q58 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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Working Paper: Optimal taxation, environment quality, socially responsible firms and investors (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:now:jirere:101.00000112

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